Taxes Paid When Buying A Home
Buying a home is one of the biggest financial commitments, and the average person needs to make in their lifetime. Besides the purchase itself, there’s also an issue of paying taxes on this large and complicated purchase. These obligations are something you need to prepare for with your tax accountant.
It’s also important that you consult the buyer if you’re selling the home and the other way around. It’s the way you can agree on who is responsible for paying the taxes, both in practice and formally.
What taxes do you need to pay?
Before going into how much tax you need to pay, it’s important to figure out what kind of taxes needs to be paid when making this purchase. It depends on where your home is since Wales has a different name for the same policy as the one in the rest of the UK. Therefore there are 2 taxes with 3 names.
- Stamp Land Duty Taxes, in England
- Land Transaction Tax in Wales
- Capital gains tax paid by the person that’s selling the home since they make the gain.
It’s possible to arrange that the buyer makes this transaction in their name since they are the one providing the money.
The documents to provide
There’s a lot of paperwork to provide to make the sale itself and only when you do you could pay the proper taxation and other obligations towards the government. The documents are there to prove that the home can be sold and that it’s safe to use.
- An Energy Performance Certificate for the property
- If you’re using an agent, you should have documents providing them with a right to negotiate for you.
- You need to have a contract for every legal offer that you make.
- There’s also a contract for the sale itself.
- Stamp Land Duty Tax is paid with a special return.
Energy Performance Certificate
The first of these documents is the one that’s often overlooked, and many don’t even know that it exists until they get into the process. That’s something you order before you put the home on the market or you want to rent it.
This needs to be done by the accredited assessor unless you have a property that doesn’t need to get one and is therefore excluded from the obligation altogether.
Many decide to use an estate agent as their proxy for selling and buying a home. That’s because the process is so long and so complicated that it will relieve you from a majority of problems that come with it. When you decide to hire one, you’ll need to have a contract authorizing them to act on your behalf.
There are also clear rules as to what estate agent is able to do, and based on what criteria they can choose the buyer. When you have a problem with a real estate agent, you’ll need to contact an ombudsman to resolve it.
For a private sale, a buyer can make the offer directly to the seller, but when you hire an estate agent, the offers could only go through them. The offer needs to be made formally in both cases, and there should be a document about what’s been offered. There can be informal talks about it as well.
In the UK the offers aren’t legally binding until the contract is introduced in the process. Everyone can back off from their offer at any time. If the offer is made to be “subject to contract” it means that the price can be negotiated before the contract is created.
Once the contract is signed, and the payment has been made, the property passes from one owner to another. The contact should, therefore, clearly specify a few things. These include:
- The property boundaries
- which fixtures and fitting are bought with the house (carpets, drapes and so on)
- Legal restrictions on the rights of the owner if there are any
- services connected with the property (gas and so on)
- The date when the sale will be completed
The money is transferred after both parties sign.
Buying a home is often a long and complex matter with a lot of paperwork and legal issues to resolve. This also needs to be done before you can pay the taxes on the sale that you’ve made. There are two different taxes to pay on the sale, and one is one the income made and the other on the transfer of the ownership of land.
There are also a few documents you’ll need to obtain to sell the home, and that can be done by real estate agent if you want to be a passive part of the process.